Correlation Between DGTL Holdings and ARHT Media

Can any of the company-specific risk be diversified away by investing in both DGTL Holdings and ARHT Media at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining DGTL Holdings and ARHT Media into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between DGTL Holdings and ARHT Media, you can compare the effects of market volatilities on DGTL Holdings and ARHT Media and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in DGTL Holdings with a short position of ARHT Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of DGTL Holdings and ARHT Media.

Diversification Opportunities for DGTL Holdings and ARHT Media

0.86

Correlation Coefficient

DGTL Holdings  ARHT Media

Very poor diversification

The 3 months correlation between DGTL and ARHT is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding DGTL Holdings and ARHT Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARHT Media and DGTL Holdings is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on DGTL Holdings are associated (or correlated) with ARHT Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARHT Media has no effect on the direction of DGTL Holdings i.e., DGTL Holdings and ARHT Media go up and down completely randomly.

Pair Corralation between DGTL Holdings and ARHT Media

Assuming the 90 days trading horizon DGTL Holdings is expected to under-perform the ARHT Media. But the stock apears to be less risky and, when comparing its historical volatility, DGTL Holdings is 3.07 times less risky than ARHT Media. The stock trades about -0.11 of its potential returns per unit of risk. The ARHT Media is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  3.00  in ARHT Media on September 5, 2024 and sell it today you would lose (1.50) from holding ARHT Media or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

DGTL Holdings  vs.  ARHT Media

DGTL Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DGTL Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

ARHT Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ARHT Media has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with DGTL Holdings and ARHT Media

The main advantage of trading using opposite DGTL Holdings and ARHT Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DGTL Holdings position performs unexpectedly, ARHT Media can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in ARHT Media will offset losses from the drop in ARHT Media's long position.

The idea behind DGTL Holdings and ARHT Media pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.